Company formation in Spain

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What is the difference between a Sociedad Limitada (SL) and a Sociedad Anónima (SA)?

• An SL is similar to the British "Ltd" or the American "LLC", while an SA is similar to a corporation.
• Accounting:
  SL: Accounting for an SL is fairly simple, and in the first three years, you can apply for "simplified accounting".
  SA: Accounting for an SA is more complicated, and yearly auditing is required.
• Share Capital
  SL: Requires backing capital of 3006€.
  SA: Requires 60,102€, though only 25% of this needs to be deposited in the bank at the time of incorporation.
• Administration
  SL: There is wide flexibility regarding how the bylaws can establish the administrative organization (sole director, joint directors, board of directors). The duration of the director's position is indefinite in this case, unless there is a limit stated in the bylaws.
  SA: The bylaws must establish a concrete administration system. Any changes must be modified in writing. The duration of the directors' positions are limited to six years (with the possibility for re-election in equal periods).
• Bylaws
  SL: Flexible: The bylaws can contain certain variations from the legal regime.
  SA: Rigid: There are more limited possibilities of establishing variations to the legal regime.
• Non-monetary Contributions
  SL: Such contributions can be made without the necessity of a report by an independent expert.
  SA: Such contributions must be accompanied by a report from an independent expert.
• Share Transfers
  SL: The law establishes limitations with regards to the transfer of shares to third parties. These limitations can be expanded or reduced in the bylaws.
  SA: In principle, there is freedom of share transfers, although the bylaws can also establish additional requisites.
• Meeting of Shareholders
  SL: The meeting can be called by direct communication to the shareholders, if the bylaws allow it.
  SA: The call for a Meeting of Shareholders should be published in the Official Bulletin of the Mercantile Registry, as well as in the newspaper.
• Dissolution
  SL: If the shareholders agree to dissolve the company, it is not necessary to publish the agreement in the newspaper.
  SA: The agreement for the dissolution of the company should be published in the Official Bulletin of the Mercantile Registry and in the newspaper.

You might choose an SA:

• if you want to be able to sell stock or company bonds, or go public (IPO).
• as part of international estate planning.
• to establish a non-resident company in Spain.

Otherwise, you would choose an SL. Most companies formed are now SLs, and not only for small businesses.

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My company wants to open a branch in Spain. Is this better than creating a new SL?

Creating a branch has similar requirements to VAT registration in Spain. In most cases, it is preferable either to create an SL or to register for VAT. If you plan to have a business address in Spain, creating an SL usually offers more tax advantages than a branch. Comparing branch creation with VAT registration, for the latter you don't have to file the corporate tax in Spain whereas you do for a branch.

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Should I be self-employed or should I form a company?

If you are self-employed and someone files a lawsuit, then you are liable -- your personal assets may be taken from you. If you form a company, then only the assets of the company are at stake. Normally, self-employment is the option when you're just starting out and aren't ready to commit money for company formation and accounting.

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Will creating a company in Spain help me get Spanish residency?

Establishing a company may help, but only if you provide substantial backing capital for the company. We work with an immigration lawyer to coordinate this process.

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Types of Business Entities in Spain

The following chart summarizes the different types of business entities. In most cases, the choice is between Sociedad Limitada and Sociedad Anonima.

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